Governance & Financial Management Issues

Accountable authorities can issue accountable authority instructions (AAIs) and associated operational guidance to assist them to meet their obligations under the Public Governance, Performance and Accountability Act 2013 (PGPA Act). These instructions can form a key part of an entity’s internal controls and operational framework, focusing on the entity’s particular needs, in order to promote the efficient, effective, economical and ethical use of relevant money, relevant property and appropriations. Entities should review their AAIs to ensure appropriate arrangements are in place. 

Where a function is transferred between non-corporate Commonwealth entities (NCEs), the established protocol of ‘finances follow function’ applies to the transfer of annual appropriations and special appropriations (including special accounts).

Transfers of annual appropriations will be through a section 75 determination made under the PGPA Act.

Unspent annual appropriations for a function at the MoG change date of effect, are to be transferred to the receiving entity, subject to any decision by the Cabinet or Prime Minister. Where internal budget supplementation has been provided for a function, or internal budget reductions taken from a function as at the time of the MoG change, these are to be reflected in the transfers to the receiving entity.

Transferring entities are to provide receiving entities with supporting information on decisions made on internal budget supplementation or internal budget reductions, including who made the decisions, the date of the decisions and the date of their effect. 

Section 75 of the PGPA Act only applies to transfers of functions between NCEs which are funded through annual appropriations (which can include receipts retained by the transferring entity under section 74 of the PGPA Act (retainable entity receipts)). Entities should contact the Annual Appropriations Team in Finance to discuss amounts to be included in the section 75 determinations and the timetable to enable the preparation of any determinations.

Transfer of appropriations may be made in tranches, as required, with the first determination typically made to commence on the MoG change date of effect:

• For administered annual appropriations, sufficient appropriations must be transferred to enable the receiving entity’s appropriation to be used for any administered payments from the MoG change date of effect until the next determination will be made (if any). Interim arrangements may be put in place for the transferring entity to continue to assist with administering functions (including making payments) under delegation or authorisation from the receiving entity, however the receiving entity’s appropriation must be used for all administered payments relating to the functions transferred. It is not appropriate for the transferring entity’s appropriations to be used for administered payments for functions that have transferred to the receiving entity.
• For departmental annual appropriations, an estimate of the amount required for departmental payments until the next determination will be made (if any) should also be transferred on the MoG change date of effect.

In relation to corporate Commonwealth entities (CCEs), as there are different situations that apply when transferring functions involving CCEs, entities should contact the Annual Appropriations Team in Finance in the first instance.

For transfers of functions which are funded through special appropriations or special accounts, please see the information below.

The established protocols of ‘employees follow function’, ‘finances follow function’ and ‘obligations follow function’ also apply to the transfer of annual estimates for the forward years.

Internal budget supplementation and reductions are reflected in the transfer of annual estimates for the forward years so that no unfunded positions or activities are transferred. Affected entities may wish to agree the transfer of annual estimates through an exchange of letters at the Chief Financial Officer (CFO) level, or higher if appropriate.

Once agreed, affected entities should enter adjustments in the AEs module of CBMS to reflect the transfer of annual estimates. A 'How to Guide on Program Restructures' is available in the CBMS Reference Material to assist entities with these adjustments. On request, Finance can assist entities with the transfer of annual estimates where whole CBMS programs are being moved from the transferring entity to the receiving entity. However, where only part of a CBMS program transfers to the receiving entity, these adjustments need to be entered by the entity.

Entities are required to record the transfer of assets and liabilities at the value recognised in the books of the transferring entity as at the transfer date. Entities may wish to use the transferring entity’s last monthly financial statements as a starting point for the calculation of the net book values of assets and liabilities to be transferred.

Assets and liabilities transfer between entities when control passes from one entity to another, or when effective administrative responsibility transfers for administered items.

The accountable authority of the receiving entity will need to ensure that its audit committee complies with the requirements of the resource management framework (section 45 of the PGPA Act and section 17 of the PGPA Rule). In particular, the accountable authority must ensure that the audit committee consists of persons who have appropriate qualifications, knowledge, skills or experience to assist the committee to perform its functions. 

Note that the audit committee of an entity affected by a MoG change may need to ensure that their skills base relates to any new business and is no longer focussed on matters that have transferred to another entity. 

For further information, see RMG-202 Audit Committees. 

Accountable authorities are also responsible for ensuring their entities have appropriate fraud and corruption control arrangements, and for setting the ethical tone within their entity. Section 15 of the PGPA Act provides that an entity’s accountable authority must govern the entity in a way that promotes proper use and management of the public resources for which it is responsible, the achievement of the purposes, and the financial sustainability of the entity for which the accountable authority is responsible. 

Section 10 of the PGPA Rule provides that an accountable authority must ‘take all reasonable measures to prevent, detect and respond to fraud and corruption relating to the entity’, including conducting assessments of fraud and corruption risks regularly and when there is a substantial change in the structure, functions or activities of the entity, and developing and implementing control plans to deal with fraud and corruption risks, and updating the plans as soon as practicable after conducting the assessments. 

For more information see the Attorney-General's Department's Commonwealth Fraud and Corruption Control Framework.

The Average Staffing Levels (ASL) policy applies to functions within the Australian Government General Government Sector (GGS). 

ASL is defined as the average number of employees (ongoing and non-ongoing) receiving wages or salaries over the financial year, with adjustments for casual and part-time employees, to show the full-time equivalent. It includes agency heads/accountable authorities, statutory office holders (except for appointees to judicial and related office positions), board/committee members, uniformed employees and overseas personnel, but excludes contractors and those employees on unpaid leave. Unfunded positions do not count towards ASL, see Annual estimates for more information.

MoG changes may increase or decrease the ASL estimate of entities based on the agreed transfer of ASL between entities and/or portfolios (‘employees follow function’). Where an entity takes on responsibility for a new function or employees from another entity, the ASL equivalent of any person transferred is added to the receiving entity’s ASL estimate, and removed from the transferring entity’s ASL estimate. Transfers within the Australian Government GGS must result in either a net nil impact or a reduction in ASL at a whole-of-government level.

Where positions associated with a function are funded but are currently unfilled, transferring entities should transfer both the ASL and funding associated with those positions.

For further information, including the methodology for calculating ASL, entities should refer to the most recent guidance issued on ASL (available via CBMS), or contact their Agency Advice Unit (AAU).

Entities may consider using the Standard Departmental Costing Template (SDCT) to calculate funding to be transferred with ASL, where the transferring entity does not have an appropriate internal cost allocation model in place and where this is agreed as an appropriate tool by both the transferring and receiving entities. A copy of the SDCT, along with the associated Departmental Costing Model Principles, can be downloaded from CBMS Estimates Memoranda.

NCEs must operate bank accounts in accordance with the PGPA Act and policy guidance on managing cash. Entities should contact the OPA Administration and Banking Team in Finance for advice on banking arrangements following the announcement of a MoG change.

Entities must advise both the OPA Administration and Banking Team in Finance and the Reserve Bank of Australia when a new bank account is opened, or if an existing bank account is amended or closed. Notification to both parties is required regardless of the transactional bank used.

Entities affected by a MoG change should consider the impacts to their banking arrangements and contact the OPA Administration and Banking Team in Finance for advice that is specific to their banking arrangements. Some of those impacts may include:

• establishing new primary accounts (such as a bank account that can receive drawings from the OPA)
• returning bank account balances to the OPA
• a need to transfer bank accounts to the receiving entity
• changes to the bank account ‘type’ (such as departmental/administered).

For further guidance, refer to RMG-413 Banking and management of CRF money.

A transferring entity should provide relevant materials such as a costing model, charging model and any associated data in respect to the activity. The receiving entity should review these materials for applicability, for example, new indirect costs (such as receiving entity’s HR/IT/support services).

A receiving entity may need to consider implementing new procedures if it gains a charging activity. There may be value in the receiving entity obtaining relevant procedures from the transferring entity.

A transferring entity should transfer any revenue retained from charging arrangements, whether for direct or indirect costs of the activity being transferred.

• in the absence of a specific decision by the Government, there should not be any accumulated ‘surpluses’ resulting from a charging activity, irrespective of the classification of the activity within the Australian Government Charging Framework, whether the funding is classified as departmental or administered, or the mechanism under which revenues are retained (for example, section 74 of the PGPA Act, special account, etc.)
• where there is a specific Government decision allowing the retention of accumulated surpluses associated with the charging arrangements, for example capital costs, these accumulated surpluses should be transferred to the receiving entity.

For information regarding charging activities (including cost recovery activities) please refer to section 27(2) of the PGPA Act Rule, RMG-302 Implementing the Charging Framework, or contact the Charging Policy Team in Finance.

All government business activities are required to apply competitive neutrality policy. Competitive neutrality aims to foster competitive markets by neutralising the potential of government entities to distort markets and by improving the efficiency of government entities. A transferring entity should provide relevant materials to the receiving entity in respect to the activity subject to competitive neutrality such as a costing model, charging model and any associated data.

For information regarding the management of competitive neutrality arrangements, please refer to the Australian Government Competitive Neutrality Policy Statement and the Australian Government Competitive Neutrality Guidelines for Managers.

Following a MoG change, the accountable authorities of both the transferring and the receiving entity will need to consider if a variation to the entities' corporate plans is required.

Entities affected by a MoG change who are accredited or sharing data under the Data Availability and Transparency Act 2022 (the DAT Act) need to report changes to their organisational structure to the Office of the National Data Commissioner (ONDC) in Finance.

The accountable authority of an NCE with new functions may need to delegate his or her powers under the PGPA Act and PGPA Rule to other appropriate officials (such as the CFO) so that they can undertake financial activities on behalf of the entity.

PGPA legislation, associated instruments and policies provide additional information on delegations of powers.

One such scenario where delegations may be appropriate is where there are travelling employees and credit cards:

• where a MoG change has an immediate effect, consideration must be given to communication with employees who are away from their normal workplace, such as those travelling interstate or overseas
• the receiving entity should consider the application of any whole-of-government delegations and relevant internal sub-delegations for transferring employees
• employees who are travelling will typically be using a whole-of-government travel card, which will continue to operate
• transferring entities should seek to make contact with any employees who are travelling to alert them of the MoG change and to advise them of possible impacts on them, including in relation to delegations they may exercise while travelling.

For advice on accounting for MoG changes, including a method to calculate funding to be transferred for employee entitlements, please refer to RMG-118 Accounting for machinery of government changes. 

The effective date for calculating the funding for employee entitlements to be transferred is the date on which the employee transfers became effective under the Public Service Act 1999 (PS Act) or other relevant legislation. 

It is imperative that entities finalise the list of transferring employees well before the completion date for the MoG change, as this can delay the calculation of funding and the value of assets and liabilities to be transferred. 

For advice on how to calculate the value of employee entitlement liabilities to be transferred, please refer to sections 24 to 26 of the FRR and the Employee benefits section of RMG-125 Commonwealth Entities Financial Statements Guide. 

Accountable authorities of entities are required under section 42 of the PGPA Act, to provide annual financial statements to the Auditor-General.

Chapter 2, Part 2-3, Division 4 of the PGPA Rule provides the reporting arrangements that apply under various MoG scenarios. Sections 17A-17J set out the special reporting requirements that apply where an entity has ceased to exist or functions have been transferred as a result of a MoG change. These reporting arrangements are designed to ensure that:

• all accountability obligations are met following MoG changes
• there is no duplication of reporting of operations impacted by these changes, including reporting relating to key management personnel (KMP).

The reporting requirements at:

• Subdivision A, sections 17A-17D of the PGPA Rule apply where an entity has ceased to exist
• Subdivision B, sections 17E-17G of the PGPA Rule apply where an entity has not ceased to exist but some or all functions have been transferred
• Subdivision C, sections 17H-17J of the PGPA Rule apply to reporting on transferred functions
• Subdivision D, section 17K of the PGPA Rule applies for miscellaneous reporting.

Financial reporting requirements for implementing and reflecting MoG changes are set out in:

• paragraphs 54-59 of the Australian Accounting Standards Board (AASB) 1004 Contributions 
• paragraphs 216-218 of AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities (Appendix C) 
• section 26 of the FRR.

Agreements between entities on the transfer of revenues, expenses, assets and liabilities should be documented in a Memorandum of Understanding (MoU). Documentation of agreements is important for clarifying accountability, preventing misinterpretations and as supporting evidence. An MoU may also deal with the transfer of other rights and responsibilities which are not recorded as assets and liabilities (for example, obligations under legal agreements or responsibility for intellectual property).

Where possible, when entities advise the Government on the MoG change date of effect (commencement date), it is recommended entities consider the start of a month or financial year.

Additional information on financial reporting in respect of restructures is available in the following:

• section 26 of the FRR relating to ‘Restructures of administrative arrangements’
• RMG-118 Accounting for Machinery of Government Changes
• RMG-119 Reporting requirements following Machinery of Government Changes.

Please contact Finance for more information.

Affected entities should have regard to the mandatory requirements and key principles of the Commonwealth Grants Rules and Principles 2024 when considering the implications of MoG changes for grant programs. In particular, entities should have regard to the key principles of partnership and collaboration, consistency with grant guidelines and established processes, governance and accountability, and probity and transparency.

Appropriations for grant programs transfer with responsibilities, including, if applicable, funding associated with administering grant programs via one of the grant hubs (see below).

The transferring entity should agree with the receiving entity the date of the transfer of grants and associated information. The receiving entity should consider whether existing grant agreements require updating, noting that where there is a change in an entity’s name, contracts will typically continue without any immediate action as section 19C of the Acts Interpretation Act 1901 allows references to departments and APS entities to be read as the new name(s).

Updates to published grant information may be required. Affected entities should contact the GrantConnect Team in Finance to discuss. Changes to open, published grant opportunity guidelines to reflect MoG changes do not generally require review by Finance.  Please contact the Grant Guidelines Team in Finance to discuss. 

Receiving entities should consider whether existing delegations, policies and processes are appropriate and consistent with published grant opportunity guidelines. They should also consider whether measures are required to manage potential conflicts of interest arising from the transfer of responsibility, noting the requirements for officials, ministers and ministerial staff to declare and manage actual and potential conflicts of interest associated with grants administration activities.

Where transferring grant programs are delivered through a grants hub, the programs must continue to be delivered by a hub on behalf of the receiving entity. Please contact the Grants Administration team in Finance for further information if required.

The ‘finances follow function’ protocol provides that annual appropriations devoted to a function at the point of the MoG change be transferred to the receiving entity. 

If an entity holds a function for less than a year that is transferred to another entity before the end of the financial year, there should be a clear relationship between the funding that was received by the entity for the function and the funding that is transferred to the receiving entity. 

However, entities can structure themselves differently and an entity may quickly integrate the function into the organisation. This could influence the funding transferred and this should be a consideration in negotiating funding.

Both the transferring and receiving entities should contact Comcover to discuss the details of the MoG change, to ensure appropriate insurance coverage is maintained. Comcover will actively support each entity throughout the MoG change, however it remains the obligation of each entity to ensure their Comcover records (including asset and expatriate schedules) are kept up-to-date throughout the MoG change, have their risk profiles reassessed and arrange adjustment of their insurance premiums and coverage.

Any current claim(s) or litigation(s) that will be transferred to the receiving entity must be considered in implementing the MoG change.

Receiving entities may need to create new or amend existing outcome statements where the transferring function does not fit within its current outcome statements. In a MoG context, entire outcome statements may be copied from the transferring entity to the receiving entity through section 75 determinations.

Any new outcome statements for the receiving entity or amendments to the receiving entity’s existing outcome statements must be approved by the Minister for Finance, and will need to be supported by legal advice.

If you are considering a new outcome statement, please contact the Annual Appropriations Team in Finance.

When assessing the requirement for outcome statement changes, entities should also consider whether changes are necessary to the list of programs in CBMS, resulting from changes either to program structures or because of movement of programs between outcomes and/or entities. See Changes to Reference Data Set under Central Budget Management System above.

Entities who receive an annual appropriation impacted by MoG changes should ensure they report their new structure and current information in their Portfolio Budget Statements (PBS) or Portfolio Additional Estimates Statements (PAES). Depending on when section 75 transfers are agreed, the change should be reflected in either the next PBS or PAES publication, whichever is the earlier. 

Where section 75 determinations have not been made in time to be reported in the next PBS or PAES, entities should add a note clarifying that further details of their MoG change will be reported in the next published PBS or PAES, whichever is the earlier.

 Entities need to ensure they reflect the correct structures and splits in their:

• entity resource statement
• outcome, program and performance information 
• budgeted financial statements.

For further information, entities should refer to the relevant guidance on the PBS and/or PAES issued prior to each Budget update. This guidance includes a preparation guide that contains a section on reflecting MoG changes.

There may be implications for an entity's procurement agreements, including contracts, deeds, MoUs or other form of agreements.

In the first instance, contact your entity's central procurement unit for assistance regarding receiving or transferring procurements. 

Further information regarding procurements, including whole-of-government arrangements, is available from Procurement.

Any queries relating to AusTender transition for approaches to market and/or reporting standing offers and contracts, including transfers of responsibility to the receiving entity, should be directed to the AusTender Help Desk. For information on reporting requirements following a MoG change, see RMG-119 Reporting requirements following machinery of government changes. 

Any queries relating to ICT procurement should be directed to the Digital Transformation Agency's (DTA's) ICT Procurement team.

A new or a receiving entity should consider the application of any whole-of-government delegations and relevant internal sub-delegations for the transferring employees.

Where there is a change in an entity’s name, contracts will typically continue without any immediate action as section 19C of the Acts Interpretation Act 1901 allows references to departments and APS entities to be read as the new name(s).

Finance’s Procurement Policy Team can also provide advice to entities undertaking procurement processes that are affected by a MoG change.

Entities should approach the APSC to discuss implications for reporting on core work and targets under the Strategic Commissioning Framework.

Property and Construction Division (PCD) in Finance is responsible for property policy, including management of the Commonwealth Property Management Framework, which includes property related policies, supporting processes and guidance. 

Compliance with the Commonwealth Property Management Framework is mandatory for NCEs and supports best practice by other entities. It establishes the broad government policy framework within which NCEs manage their property portfolio and seeks to enhance good property management practice across entities, providing increased efficiency and effectiveness of property use in the course of government business. It provides guidance to entities on their responsibilities across a broad range of property matters including planning, funding, leasing, ownership, management, disposal and reporting. 

The whole-of-Australian-Government Property Services Coordinated Procurement (PSCP) Arrangements have been established to support the Commonwealth Property Management Framework and include Property Service Providers (PSPs) assigned to entities and a Strategic Property Adviser (SPA) for the Commonwealth that provide property related leasing and facilities management services, including strategic leasing advice to assist with future lease planning.

Finance maintains the Australian Government Property Register (AGPR) which records the Commonwealth’s leased office accommodation and owned property. This information is used for, but not limited to, the annually published Office Occupancy Report, the Commonwealth Leasing Strategy (CLS), and to support Treasury in the calculation of Mirror Tax. NCEs are required to participate in these property data collections. The AGPR contains:

• Property Marketplace which enables entities to advertise excess Commonwealth leased or owned office space
• reporting capabilities for entities to analyse their reported data
• Property Management Plan repository.

PCD in Finance can assist entities requiring advice on implications of MoG changes on property.

Security clearances are governed by the Protective Security Policy Framework administered by the Department of Home Affairs. 

Transferring entities must provide receiving entities with information on, and arrange for the transfer of, current security clearances held by affected employees. 

Where the receiving entity requires a higher clearance for transferring employees as a condition of employment, the receiving entity is responsible for discussing and arranging the upgrade with the employees.

For more information on transferring security clearances, please see the Australian Government Security Vetting Agency.

Where MoG changes occur, entities will need to contact the Electoral and Superannuation Policy Branch in Finance about the implications for membership of the civilian defined benefit schemes (CSS and PSS) and the defined contribution scheme PSSap.

MoG changes will have implications for entities’ Pay as You Go (PAYG) withholding, Fringe Benefits Tax (FBT), Goods and Services Tax (GST) and Business Activity Statement (BAS) returns, as well as funding agreements and contracts. Entities may also need to consider updates to Single Touch Payroll (STP) reporting – either setting up STP reporting for the new entity and/or transitioning employees between entities.

Entities may also need to update business and legal names in addition to updating authorised contacts for Australian Business Numbers (ABNs). 

Entities should contact the Australian Securities and Investments Commission and the Australian Taxation Office (ATO) for advice on how to update these details.

Government entities are unable to apply for a new ABN online. Entities must complete and return form ‘NAT 2946’ available from the ATO’s publication ordering service. For more information, visit the Australian Business Register's Apply for a government ABN.

Government entities are able to apply for an ABN in advance of the entity’s start date. However, the ABN will not be shown in the public ABN Lookup portal prior to this time.